[Congressional Record Volume 141, Number 169 (Monday, October 30, 1995)]
[Extensions of Remarks]
[Pages E2063-E2064]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         EGYPT'S ECONOMIC BIND

                                 ______


                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                        Monday, October 30, 1995

  Mr. HAMILTON. Mr. Speaker, I would like to bring to the attention of 
my colleagues a recent World Bank study which highlights the economies 
of the Middle East in general and Egypt as a leader in that region in 
particular.
  The study entitled ``Claiming the Future'' was the subject of an 
October 18, 1995 editorial by Thomas Friedman in the New York Times. 
Mr. Friedman summarizes portions of the World Bank study which show 
that in 1960 the Middle East had a per capita income higher than Asia, 
but in 1990, even with oil wealth, the Middle East per-capita income 
had only doubled while that of Asia had more than quadrupled. Economic 
reform, privatization, and development have eluded the Middle East to a 
larger extent.
  These problems are acute in Egypt. The need for economic 
restructuring is enormous. Egypt and the entire Middle East region will 
need to focus on economic issues if the region is to catch up with the 
rest of the world. Egypt and the Middle East need economic reform if 
they are to generate jobs for the burgeoning youth population now 
entering the job market.
  The excellent New York Times editorial follows:

                [From the New York Times, Oct. 18, 1995]

                        Egypt Runs for the Train

                        (By Thomas L. Friedman)

       John Page, the World Bank's chief Middle East economist, 
     likes to say that the difference between the global economy 
     of the 1950's and the 1990's is the difference between two 
     trains. The global economy of the 1950's he says, ``was like 
     the old train from Heliopolis [a Cairo suburb] to Cairo. That 
     train stopped at every station, and if you missed one, you 
     could always catch another. It was so slow that if you missed 
     the last one, you could ride your bike and catch up at the 
     next station. If you couldn't afford a ticket, you could 
     always ride on the roof. The global economy of the 1990's by 
     contrast is like the bullet train from Tokyo to Osaka. If you 
     miss it it's gone--goodbye--and you can't catch up.''
       That's a useful image to keep in mind when visiting Cairo 
     these days because the Arab world in general, and Egypt in 
     particular, is in real danger of missing the train, and the 
     consequences could be catastrophic.
       Consider some startling statistics from a new World Bank 
     study of Middle East economies entitled ``Claiming the 
     Future,'' which will be released next month. In 1960, the 
     seven leading Arab economies had an average per-capita income 
     of $1,521, while the seven East Asian ``tigers''--Taiwan, 
     South Korea, Hong Kong, Singapore, Thailand, Malaysia and 
     Indonesia--had a per capita income of only $1,456. The Arabs 
     were slightly ahead. By 1991, however, the per-capita income 
     of the Arab countries was only $3,342, while the Asian tigers 
     were up to 58,000 per person.
       Today the Arab Middle East attracts 3 percent of global 
     foreign investment, while East Asia attracts 58 percent. 
     Egypt exported and imported more goods and services 20 years 
     ago than it does today, relative to the size of its economy. 
     In other words, Egypt was more integrated with the world 
     economy in 1970, under Gamal Abdel Nasser, than in 1990, 
     under Hosni Mubarak. The Arab world lags far behind East Asia 
     in spending on education, in the number of women in the work 
     force and in every measure of productivity.
       Why the difference? One explanation is that in East Asia 
     leaders usually based their political appeal on economics--
     ``Have I made you better off today than four years ago?''--

[[Page E 2064]]
     while Arab leaders based their political appeal on fighting colonialism 
     or Zionism, or on ethnic and religious bonds, or on sheer 
     brute force. No Arab leader ever said: ``Judge me on my 
     G.D.P.'' So Arab economies existed to support the state, 
     instead of the state existing to support the economy. Or, as 
     the Egyptian intellectual Tahseen Bashir says: ``Egypt was 
     first a state, then the people were created.''
       A year ago 500 Egyptian businessmen gathered for the 
     country's biggest-ever economic conference. They adjusted the 
     date precisely so President Mubarak could attend. The day of 
     the conference Mr. Mubarak canceled because of another 
     pressing engagement--he had to receive the President of 
     Mauritania.
       No wonder Mr. Mubarak has failed to institute the 
     structural reforms that could make Egypt attractive to 
     foreign investors and competitive on the world stage--that is 
     downsizing the bloated bureaucracy, privatizing state 
     industries and reforming investment regulations. President 
     Mubarak is terrified that downsizing will lead to 
     unemployment and riots.
       That is a legitimate fear. But even if Mr. Mubarak doesn't 
     want to touch his bureaucracy, he could at least reform 
     Egypt's antiquated commercial codes, arbitrary tax 
     regulations and red-tape foreign investment rules (a foreign 
     investor needs the signatures of 26 different officials to 
     set up shop here) so that the private sector can provide the 
     jobs the Government cannot.
       Fact: Mr. Mubarak has more mummies in his cabinet than King 
     Tut. His team of ministers is the oldest in the Arab world. 
     It has not risen to the economic challenge, and so investors 
     go elsewhere.
       It is time for the U.S. to stop looking at Egypt as a 
     pillar in the peace process, and start looking at it as an 
     economic laggard badly in need of shock therapy. Egypt 
     doesn't need a shuttle by the Secretary of State. It needs a 
     shuttle by the Secretary of the Treasury. The World Bank 
     estimates that the Arab states and Iran will have to create 
     47 million new jobs by the year 2010 just to accommodate the 
     population boom that will enter the labor force by then.
       If governments here do not reform themselves to meet that 
     challenge, this region won't just miss the tram. The whole 
     station will explode.

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